The fundamental authority for federal regulation of business is the Constitution of the United States and most of the economic powers exercised by the federal government are contained in the commerce clause, Article I. Section 8. The clause is aimed at preventing states from establishing laws and regulations that would interfere with trade and commerce among the states, and to this purpose the constitution expressly delegated to the national government the power to regulate interstate commerce. Article I, Section 8, of the U.S. Constitution expressly permits Congress “to regulate Commerce with foreign nations, and among the several states and with the Indian tribes”.
This clause has had a greater impact on business than any other provision in the Constitution. For some time, the commerce power was interpreted as being limited to interstate commerce and not to intrastate commerce. In 1824, however, in Gibbons v. Ogden, the U.S. Supreme Court held that commerce within a state could also be regulated by the national government as long as the commerce substantially affected commerce involving more than one state (Miller and Jentz, 2005).
As the nation grew, the commerce clause became a vehicle for the additional expansion of the national government’s regulatory powers. The Constitution’s commerce clause as interpreted by the United States Supreme Court means, in effect, that states cannot regulate interstate commerce and only the national government can. This is the dormant commerce clause. If a court finds that a state law places too great a burden on interstate commerce, the law will be deemed unconstitutional on the ground that it violates the dormant commerce clause (Miller and Jentz, 2005).
There are other powers in Article I, Section 8, that also provide a base for the exercise of federal power over business. Included, for example, is the power to provide for “the general welfare of the United States” to levy and collect taxes, to provide for the common defense, to borrow money to establish bankruptcy laws, to promote science and useful arts by granting patents and exclusive rights over writings and discoveries and “to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States or in any Department or Officer thereof.”
The federal government’s ability to exercise these powers to regulate business depends on the interpretation of them by the Supreme Court. As a result of liberal interpretations by the Court, the federal government today is able to impose on business just about any regulation that can be passed through congressional lawmaking machinery.
All federal regulation originates in an act of Congress and regulation has been defined as “any attempt by the government to control the behavior of citizens, corporations or sub governments (Steiner and Steiner, 2005). Proposals for laws are called bills and they are placed before the Congress for approval. When a bill is passed by both houses of Congress and signed by the President its provision becomes law. The responsibility of creating specific regulations lies with the appropriate regulatory agencies that implement the provisions of the Bill.
The Federal Reserve Board, for example, has complete authority to set interest rates. The Federal Trade Commission (FTC) has authority to determine what is and what is not fair advertising. The Environmental Protection Agency (EPA) can set standards that limit polluting discharges in air, water and on land. There are some legislation with specific instructions to agencies. The Clean Air Act Amendments of 1990 charge the EPA with establishing standards for 188 hazardous air pollutants (Steiner and Steiner, 2005).
The Pollution Prevention Act of 1990 requires that each manufacturing facility that uses one or more of 329 listed chemicals must prepare an annual report. These examples show that the great bulk of federal regulation today is created and administered in regulatory agencies based on broad grants of authority found in statues over the years (Steiner and Steiner, 2005).
The role of the Constitution in business regulation has also depended on a large extent on the evolution of Supreme Court decisions concerning Constitutional regulatory powers. For the first 150 years, the Court took two major paths in the context of legal authority over business: On one hand, it protected business from government regulations, both federal and states and on the other hand, it opened the door for new regulations.
Today at least theoretically, the power over commerce authorizes the national government to regulate every commercial enterprise in the United States and Federal legislation governs virtually every major activity conducted by businesses – from hiring and firing decisions to workplace safety, competitive practices and financing (Miller and Jentz, 2005). In the last decade or so, the Supreme Court has begun to curb the national government’s regulatory authority under the commerce clause.
According to a news article by BBC, recently, in June 2008, the ban on handguns in Washington DC has been ruled unconstitutional by the United States Supreme Court. In a 5-4 decision, the justices upheld a lower court ruling striking down the ban. They said individuals had a right to keep handguns for lawful purposes. The latest ruling says that the constitution “protects an individual right to possess a firearm unconnected with service in a militia, and to use that arm for traditionally lawful purposes, such as self-defense within the home”.
BBC’s Justin Webb in Washington says the ruling is of profound importance, as it enshrines for the first time the individual right to own guns and limits efforts to reduce their role in American life. Since 1976, the private possession of handguns had been prohibited in the nation’s capital, while rifles and shotguns had been required to be locked away or dismantled. The DC city council argued that the ban was needed to help keep violence and murder rates down. But the measure was challenged by a security guard, Dick Heller, who argued he had a constitutional right to have one at home.
This set off a constitutional debate on whether the Second Amendment, ratified in 1791, protects an individual’s right to possess guns, or simply a collective right for an armed militia. The Supreme Court affirmed that the Second Amendment protects the right of Americans to keep and bear arms. This article shows how the Constitutional right affects the business of dealing in handguns and how the legal system has been used with respect to recognizing or protecting that right.
BBC (2008). US Court Overturns DC Handgun Ban. BBC News. Web.
Miller, LeRoy Roger and Jentz, A. Gaylord (2005), Business Law Today. Thomson West Publishers.
Steiner, A. George and Steiner, F. John (2005). Business, Government and Society. McGraw-Hill Professional.